Correlation Between Kuo Toong and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both Kuo Toong and Nankang Rubber at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kuo Toong and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kuo Toong International and Nankang Rubber Tire, you can compare the effects of market volatilities on Kuo Toong and Nankang Rubber and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kuo Toong with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuo Toong and Nankang Rubber.
Diversification Opportunities for Kuo Toong and Nankang Rubber
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kuo and Nankang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kuo Toong International and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and Kuo Toong is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kuo Toong International are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Kuo Toong i.e., Kuo Toong and Nankang Rubber go up and down completely randomly.
Pair Corralation between Kuo Toong and Nankang Rubber
Assuming the 90 days trading horizon Kuo Toong International is expected to generate 1.83 times more return on investment than Nankang Rubber. However, Kuo Toong is 1.83 times more volatile than Nankang Rubber Tire. It trades about 0.3 of its potential returns per unit of risk. Nankang Rubber Tire is currently generating about -0.02 per unit of risk. If you would invest 4,855 in Kuo Toong International on November 2, 2024 and sell it today you would earn a total of 505.00 from holding Kuo Toong International or generate 10.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kuo Toong International vs. Nankang Rubber Tire
Performance |
| Timeline |
| Kuo Toong International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Nankang Rubber Tire |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Kuo Toong and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kuo Toong and Nankang Rubber
The main advantage of trading using opposite Kuo Toong and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuo Toong position performs unexpectedly, Nankang Rubber can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.The idea behind Kuo Toong International and Nankang Rubber Tire pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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